Georgia should Attract Maximum Financial Resources from International Institutions for Economic Rehabilitation
The global economy is entering the crisis phase amid the coronavirus pandemic. This process primarily damages developing countries, including Georgian economy.
Without international financial assistance, developing countries fail to overcome the economic damages. Scales of the assistance that Georgia will manage to mobilize from international donors will determine how efficiently the country will cushion the economic plunge.
Georgia has started negotiations with the International Monetary Fund (IMF) and the country expects to attract significant assistance. Furthermore, Georgia has obtained a 45 million EUR aid package from the World Bank (WB), despite the project’s direct objective is not to alleviate the pandemic’s economic impact, but to promote the ongoing reforms in Georgia. It is evident that the country vitally needs such resources. Furthermore, as the USA Embassy in Georgia has announced, the USA will transfer a 1.1 million USD assistance package in support of the Georgian healthcare sector.
The Asian Development Bank (ADB) has confirmed its readiness to assist Georgia, as well as the EU ambassador to Georgia. On March 30, the European Commission released a statement notifying that it will allocate 140 million EUR for the Eastern Partnership countries (Georgia, Armenia, Azerbaijan, Belarus, Moldova and Ukraine) to finance essential needs against the coronavirus pandemic.
“Today the National Bank is the weak chain of the Government”, economist and professor Vladimer Papava told CBW and added that the NBG has delayed currency interventions and this delay caused panic in our society.
“Georgia is entering the critical phase. In this situation, the Government officials provide good job by updating the society daily on the current situation through media agencies. The National Bank of Georgia (NBG) should also intensify activities to regain public trust”, Vladimer Papava said.
The economy has become a hostage to medicine and before development of action plans and programs, the Authorities should extinguish the fire in the economy, he noted.
“The essence of the crisis is that medical workers cannot specify when the pandemic is over – in a month, or 3, or a year. This factor has generated the major unclearness in fighting against the coronavirus, preparing economic and healthcare action plans and creating accurate and precise protocols. Medical workers use medications that were used against Ebola and AIDS. Coronavirus turned out an unexpected, unexplored phenomenon for medicine. We can say the same regarding the economy too. We cannot settle economic problems without resolving medical problems. The economy is a hostage to medicine. The experience gained amid the 2008-2009 global economic crisis will not work in this case. We have two tasks to resolve today: current and strategic ones”, Vladimer Papava pointed out.
The current objective is to extinguish the fire in economy, while the strategic objective is to ensure economic recovery in post-crisis period, Papava pointed out.
“The current task is to put out the fire, including in the economy, while another task is to revive the economy. In general, economy cannot be recovered amid the crisis period. Therefore, we should be prepared for the post-crisis period.
When asking the Government to submit the program, our expectations are exaggerated, because, today, we should ask the Government to extinguish the fire in the economy and then prepare the program for the post-crisis period.
The Government is not hasty to submit this program and this cannot be appraised as weakness. Today our key objective is to extinguish the fire”, Papava said.
Essential problems are recorded on the currency market. The national Bank that decided to stay away, even in the most difficult situations, and wait for instructions from the International Monetary Fund (IMF), he said.
“International financial institutions do not know what to do, because this is an absolutely extraordinary and unusual case in its nature. The problem does not consist in economy. The IMF is obliged to provide due assistance to all countries, but we should also analyze the reality. We should not think that we will receive significant funds. Everybody needs assistance in the crisis period. I think the assistance package will be about 250-300 million USD in several tranches.
The National Bank has not intervened in the currency market and this decision caused panic in the society. The national currency stability is ensured by money transfers, foreign direct investments and everybody knows that in the countries, where our compatriots live and work, many enterprises and companies were closed and money transfers declined too. Furthermore, the inflow of foreign direct investments will also shrink.
Despite unfavorable economic reality in the country, our medical system and situation is not worse compared to the neighboring countries. We have much better situation than even economically stronger Germany and the USA. In terms of medical aspects, the GEL-related panic was not to be so essential, but the Georgian currency has seen the biggest plunge in the world, because the National Bank decided to stay away. It decided that this was not its business and started waiting for instructions from the International Monetary Fund (IMF)”, Papava said.